Search interesting materials

Tuesday, January 02, 2007

Beware the tranquility

Global equity volatility and Indian equity volatility is low. The blue line is the implied volatility off the S&P 500 options market; the red line is the backward looking rolling window volatility of Nifty (width = 66 days).

I wrote an article in Business Standard titled Beware the tranquility. In this, I worry that the world could undergo a `phase transition' and jump back to a configuration of high volatility, high risk premia and high liquidity premia. This is linked to the arguments made by Raghuram Rajan in June 2006 where he draws a link between low interest rates and the remarkable decline in risk premia and liquidity premia.

No comments:

Post a Comment

Please note: Comments are moderated. Only civilised conversation is permitted on this blog. Criticism is perfectly okay; uncivilised language is not. We delete any comment which is spam, has personal attacks against anyone, or uses foul language. We delete any comment which does not contribute to the intellectual discussion about the blog article in question.

LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.